Recurring payments are a payment model where customers authorize business owners to charge for their subscribed products or services on a predefined schedule. These payments can be set up via recurring billing for any frequency that’s agreed upon between the customer and the business, such as weekly, biweekly, monthly, quarterly, or on an annual basis. Recurring payments are most commonly used in subscription businesses such as SaaS companies, DTC ecommerce brands, online learning providers, health and fitness clubs, and streaming services.

Recurring payments are beneficial for both customers and merchants. For customers, recurring payments are more convenient because they only need to enter their billing information once, and payments are automatically deducted from their bank accounts on the appropriate billing dates. For merchants, recurring payments ensure a prompt and reliable inflow of capital, helping to produce a healthier cash flow and lowering collection costs. This puts businesses in a better economic position and reduces the amount of guesswork required in financial planning, as they’ll know how much revenue they have coming in with a high level of certainty. Recurring payments also strengthen the relationship between businesses and their customers by making it much easier for them to do business with the company.

Examples of recurring payments include cell phone bills, gym membership fees, utility bills, magazine subscriptions, and Netflix subscriptions. Recurring payments can be set up via automatic bill payment, where a merchant automatically charges a customer for goods or services on a prearranged schedule. Once the customer grants the merchant permission to take payment on a recurring basis, no more permissions are needed.